Options Trading News

September 28, 2012  Fri 4:15 AM CT

Herbalife has been at the woodshed since April, but yesterday the bulls stepped in.

optionMONSTER's tracking programs detected a surge of activity in the October 52.50 calls, with buyers paying $0.50 to $0.60 early in the session. Almost 11,960 traded in total, compared with previous open interest of 1,147 contracts.

Calls lock in the price investors must pay to buy shares, so they can generate some nice leverage in the event of a rally. That's exactly what happened, and those calls more than doubled to over $1.30 later in yesterday's session. (See our Education section)

HLF closed at $47.01, up 4.35 percent. The distributor of weight-loss products had peaked over $70 in the spring but cratered after hedge-fund manager David Einhorn raised questions about its franchisee relationships.

The stock continued to fall despite quarterly results beating expectations in late July. Short interest is also 13 percent of the float, which could draw some buyers to the name.

Overall option volume was 11 times greater than average in the session, with calls accounting for more than 80 percent of the total.

(A version of this post appeared on InsideOptions Pro yesterday.)
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I have written a few things on the Covered Call Strategy over the last two weeks. Please understand that those two previous articles plus this one do not constitute a proper, fully in-depth lesson on the Covered Call Strategy like we have in our classes at Option Monster Education. I have picked out a few topics that I believe were worth noting and today I am going to add the final one.

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